Wells Fargo & Co.’s stock was down by 0.4% on Tuesday after the bank said it plans to book $750 million to nearly $1 billion in fourth-quarter severance costs.
The bank
WFC,
also said it continues to work through regulatory issues, including its $1.93 trillion asset cap set by the U.S. Federal Reserve in 2018, but it did not provide a specific timetable on when that cap could be lifted.
The bank is also seeing strength in the U.S. consumer as it looks toward 2024.
Chief Executive Charlie Scharf said at the Goldman Sachs U.S. Financial Services conference that Wells Fargo has seen its level of internal turnover come down, which is leading to “more severance than we otherwise would have anticipated.”
Scharf said the bank plans to take up to “a little less than $1 billion” in severance costs as it focuses on efficiency.
“We’re going to have to be more aggressive about our own internal actions,” he said. “But again, we think that that’s the right thing to do for the long term.”
Wells Fargo’s effort to become more efficient comes as Citigroup Inc.
C,
works through its own major reorganization.
Also read: Citigroup confirms ‘next layer of changes’ and ‘difficult’ decisions
Scharf said Wells Fargo continues to make progress on consent orders from federal banking regulators, along with the asset cap.
“Our commitment to continue and finish that work is the highest priority,” he said.
Although people who are less affluent are struggling more in the current economy, Scharf said the bank is seeing “continued strength and consistency when we would expect to see more slowing at this point in time.”
The bank’s commercial clients continue to navigate the current environment more conservatively, he said.
Efficiency remains a primary focus in 2024, he said. Wells Fargo doesn’t expect “a lot of growth for the next couple of quarters” in net interest income, which is the profit banks make on loans after breaking out the cost of paying interest for deposits.
Later in 2024, Scharf said, “you’d start to see some more growth across the corporate spectrum.”
Wells Fargo reduced its head count by 6,471 to bring its total down to 227,363 as of Sept. 30, the bank disclosed in its fiscal third-quarter results.
The bank has been de-emphasizing its mortgage business. Instead, the lending part of its credit-card business as well as payments will be a strategic priority for the company.
Also read: Wells Fargo’s stock gains as third-quarter earnings top estimates by a wide margin
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